Fixed-income securities consist of debt instruments and preferred stock. Bonds are debt securities in which a borrower promises to pay a specified interest rate and principal at a future date. Which of the following statements about Treasury bonds is the most accurate? O Treasury bonds have a very small amount of default risk, so they are not completely riskless. O Treasury bonds are completely riskless. O Treasury bonds are not completely riskless, since their prices will decline when interest rates rise.

Fixed-income securities consist of debt instruments and preferred stock. Bonds are debt securities in which a borrower promises to pay a specified interest rate and principal at a future date. Which of the following statements about Treasury bonds is the most accurate? O Treasury bonds have a very small amount of default risk, so they are not completely riskless. O Treasury bonds are completely riskless. O Treasury bonds are not completely riskless, since their prices will decline when interest rates rise.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Which of the following is correct? A. Bonds maturing at a specified single date are called ordinary bonds. B. Equity securities and debt securities differ only in their effect on a company’s cash flow. C. One purpose in holding bonds as a long-term investment is to provide the investor a voting voice in the management of the issuing company. C. On bonds, the yield rate and the nominal rate of interest are always different.
Which of the following statements is not correct? a) The export value of the bond; the value the investor pays when buying bonds b) Nominal value of the bond; is the value written on the bond c) Another reason for the difference in bond market prices is the dividend paid to bonds. d) Periodic interest amounts on bonds are calculated at nominal value. e) Market value of a bond is equal to the present value of the interest to be paid by the bond and the principal amount to be paid at the end of maturity. ------------------ What is the market value of İdil Gıda's bond with a nominal value of 15000 USD, maturity of 3 years and 30% annual interest payment, assuming that the desired yield rate is 36%? a) 12500b) 13494c) 9000d) 5456e) 7594 ============ What is the market value of Beril Gıda A.Ş.'s bond with a nominal value of USD 12,000, maturity of 5 years and an annual interest payment of 25%, when the desired rate of return is 25%? a) 18000b) 15000c) 12000d) 16000e)…
Which of the following types of debt securities protect investors against interest rate risk? a. extendible notes b. floating rate bonds c. floating rate bonds and extendible notes d. original issue deep discount bonds
1. Which of the following is true about bonds payable?A. Bonds payable is always reported as a non-current liability.B. Bonds are usually issued as a form of stock financing.C. Coupon interest payments on term bonds fluctuate depending on the market rate on the dateof interest payment.D. It is possible that the total proceeds from the bond issuance equal its maturity value.2. Which of the following is NOT TRUE about bond interest?A. These are usually paid at designated coupon interest payment dates.B. If a bond is issued at a discount, interest payment is lower than interest expense for the sameperiod.C. If a bond is issued at a discount, interest payment increases over the life of the bond since thecarrying value increases.D. A bond issued at more than face value is a bond issued at a premium.3. At the maturity date, bonds are redeemed at:A. Original issue priceB. Face valueC. Market value on redemption dateD. Market value on redemption date, less any related costs4. If the market…
Which of the following statements is most correct? Group of answer choices A debenture is a secured bond that is backed by some or all of the firm’s fixed assets. Junk bonds typically have a lower yield to maturity relative to investment grade bonds. Subordinated debt has more default risk than senior debt. All of the statements above are correct. None of the statements above is correct.
1. Under what conditions would the yield-to-maturity and current yield of a bond be equal? Group of answer choices a. The bond is priced at par b. The bond is priced at a discount c. Insufficient information d. The bond is priced at a premium 2. Which of the following is correct about the risk-free rate as used in valuing equity instruments? Group of answer choices a. The risk-free rate accounts for the rate of return or yield of a government instrument which does not carry any risk. b. The risk-free rate used for valuing equity instruments is normally the yield of a long-term government security. c. The risk-free rate used for valuing equity instruments is the same as that used for valuing short-term debt instruments. d. The risk-free rate accounts for the risks related to government securities which is composed of credit-spread, maturity risk premium and the real risk-free rate. 3. Berg Inc. has just paid a dividend of P2.00. Its stock is now selling…
Based on the graph, which of the following statements is true? Neither bond has any interest rate risk. The 1-year bond has more interest rate risk. Both bonds have equal interest rate risk. The 10-year bond has more interest rate risk. Which type of bonds offer a higher yield, noncallable bonds or callable bonds? Answer the following question based on your understanding of interest rate risk and reinvestment risk. True or False: Assuming all else is equal, short-term securities are exposed to higher reinvestment risk than long-term securities.
Can I use the yield to maturity (YTM) on a bond issued by the company as the cost of debt? A Yes, you can use the YTM B No, you cannot use the YTM C Only if the bond is liquid and has not special feature embedded in it D There is not enough information to answer this problem
Which of the follwing statement is correct. As the credit risk of a bond increases: The YTM falls and price of the bond falls The YTM increases and price of the bond falls The YTM falls and price of the bond rises The YTM increases and price of the bond rises unanswered
Which of the following statements is correct? Subordinated debt has less default risk than senior debt. Junk bonds typically have a lower yield to maturity relative to investment grade bonds. A debenture is a unsecured bond. None of the statements are correct.
Which of the following events would make it more likely that a company would choose to call it’s outstanding callable bonds? An increase in market interest rates. An increase in the call premium. All the other statements are correct. The company’s bonds are downgraded. A reduction in market interest rates.
1. Statement I - Before a bond is issued, the issuer must have to consider or study the current market interest rate to arrive at a quoted interest rate. Statement II - At the final issue of bonds, the quoted Interest rate will become fixed and is termed as coupon rate. -Only statement II is correct -Both statements are incorrect -Only statement I is correct -Both statements are correct 2. The liquidity function of the financial market provides for an opportunity for the investors to sell their financial instruments at its prevailing fair value. Is it true or false? 3. Which of the following is not a role of a financial manager? -Supervises employees who do accounting and budgeting reports department. -Makes sure that legal requirements affecting financial aspects are met. -Makes financial decision -Prepares financial reports 4. Which of the following statements is incorrect? -Liquidity premium is required by investors to compensate them in case there is a decrease in the purchasing…

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